Filesharing: the good, the bad and the uncertain

Point-Topic: The music business currently has two conflicting opinions on filesharing via peer-to-peer (P2P) networks. P2P allows digital music files to be swapped between users logged on to the network. On the positive side, many musicians and industry figures realise that P2P networks can be important in building up a fan base and helping a new band to break into the mainstream without spending a fortune. In the UK, the Arctic Monkeys and Nizlopi are among many that have used free, legally available songs add to ‘word-of-mouth’ publicity.

But the music industry, along with the film and TV industry, recognises that file sharing is also a significant problem. Illegal distribution of pirated copyright material is a crime and it probably costs the industry in lost revenue. Certainly industry bodies such as the BPI (British Phonographic Industry) in the UK and the RIAA (Recording Industry Association of America) in the US blame P2P for declining record sales. The BPI blames file sharing for ‘more than £650 million [US$1130 million] in lost sales in the last two years alone’. Some critics question whether things are all that bad, and whether any shortfall can be attributed to P2P alone. For example, the BPI itself said that 2005 was one of its ‘best years yet’, although it noted that digital music services (both legal and illegal) had lead to a year-on-year fall in the sale of compilation albums of nearly 16%.

Certainly, more and more consumers are choosing to buy music in digital format, from outlets such as iTunes.

Of course, pirated music remains. But the last 12 months have seen the courts worldwide take a negative view of most P2P operations. 2005 saw many P2P sites stop operation, a result of legal action around the world, much of it lead by the RIAA. The US Supreme Court ruling of June 2005 has shut down some operations (like Grokster), with others like eDonkey looking to change their business model and migrate to a fully legal subscription based service. Legal action in Australia means that KaZaA is not allowed in that country. In the UK, the BPI secured a court victory in January against file swappers, following many out of court settlements.

So, the legal environment for P2P sites (with the possible exception of BitTorrent) is tougher. And so is the competitive environment. Unlike 2 or 3 years ago, there are now comprehensive and legal sites that offer music, and some providing video. The niche that P2P once occupied alone has become crowded. But that does not mean that the ‘copyright industries’ have won. After all, people have been copying music and video since the days of reel-to-reel tape. And the continuing growth in P2P traffic (partly driven by bigger and bigger video file sizes) shows that people are continuing to swap files, despite legal action. The software is out there, and P2P by its nature has a de-centralised architecture that is difficult to shut down. Some P2P developers can also reasonably argue that their software has ‘substantial non-infringing uses’. In other words, there is a legitimate use for the software, and it should therefore be allowed providing it is not put to illegal use.

But not everyone wants to tread carefully through a complex legal minefield. The availability of easy-to-use legal alternatives, coupled with the threat of multi-thousand dollar fines and payments, could mean that the proportion of illegal P2P users stabilises whilst ‘ordinary’ consumers go to iTunes. At least until a new generation of industry-approved P2P software arrives to distribute legally copied digital content for record labels and film studios.

Music in peer-to-peer (P2P) network

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